Domtar Corporation has entered into a definitive agreement to sell its personal care business to American Industrial Partners (AIP) for $920 million.
In August, Domtar executives had announced the company was putting the personal care business up for review. Since then, the company has undertaken a comprehensive strategic review of value-creating alternatives for the business. With the sale, Domtar is reinforcing its focus on building an industry-leading paper, pulp and packaging company to deliver long-term shareholder value.
“This transaction represents a milestone in Domtar’s ongoing portfolio transformation and further advances our strategic initiatives that will position Domtar for a sustainable and successful future,” says John D. Williams, President and Chief Executive Officer of Domtar. “We conducted a thorough review of strategic alternatives for personal care and believe the sale maximizes value to Domtar shareholders by allowing us to strengthen our balance sheet, enhance liquidity and buy back shares. The robust interest received reflects the excellent work by our team to improve profitability, gain new customers and enhance the operating structure and cost profile of the business. We are confident that AIP is the right owner to advance the business and look forward to working with them to execute a smooth and successful transition for the customers and employees of personal care.
Domtar plans to use the proceeds of the sale to pay down debt and repurchase shares.
“The sale is an important component of our strategic plan and will provide us with additional capital and resources to strengthen and invest in the future of Domtar, leading to a more focused business portfolio,” Williams adds. “We are making solid progress with the conversion of the Kingsport, TN mill, and are excited about the prospects for building a large, value-added packaging business. We expect construction to officially begin at Kingsport in the second quarter of 2021, setting the stage for the completion of North America’s premier lightweight containerboard facility, with the ability to produce and market approximately 600,000 tons of high-quality recycled linerboard and corrugated medium, by the end of 2022.”
A New York, NY-based private equity firm, American Industrial Partners, invests in industrial businesses serving domestic and global markets. The firm has deep roots in the industrial economy and has been active in private equity investing since 1989.
Domtar’s personal care unit, which is generating about $110 million in annual earnings before interest, taxes, depreciation and amortization, has grown sharply in recent years thanks largely to a slate of acquisitions which include Attends adult incontinence businesses in North America and Europe, Associate Home Products, a U.S. private label diaper maker, Labatorio Indas, a Spanish hygiene specialist and Butterfly BodyLiners a start-up in the bowel leakage space. Rumored suitors for the business had previously included Ontex.
